High-tech IPOs in the USA, UK and Europe after the dot-com bubble

Abstract

From 1998 to 2001, the high-tech industry saw a dramatic increase and subsequent sharp decline in market capitalisation during a phenomenon known as the dot-com bubble. During this time there were a large number of private companies that made the decision to go public via an Initial Public Offering (IPO) of stock on the general equities market. After the dot-com crash of 2001, the IPO market for high-tech companies changed dramatically. Far fewer companies went public, and they had much lower first-day returns than those during the bubble. This paper explores the first-day returns of high-tech IPOs in the USA and Europe in the post-bubble era. We compare the results of the 2002?2005 post-bubble period with those of the 1998?2001 dot-com bubble period. We find that the high-tech IPO market was dramatically affected by the dot-com crash and that, after the crash, the number of high-tech IPOs dropped considerably, as did the average first-day returns of these IPOs. Finally, we find that the European high-tech IPO market was not as adversely affected by the dot-com crash as the American market.